Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Fonterra not in breach - Commerce Commission

22 November 2005/064

Commerce Commission considers Fonterra not in breach in including capital profits

The Commerce Commission has reached a preliminary view that Fonterra has not breached the Dairy Industry Restructuring (Raw Milk) Regulations 2001 by including capital profits in retention when calculating the wholesale milk price.

In October, Waharoa-based Open Country Cheese Company Ltd applied to the Commission to determine whether capital profits from Fonterra's sale of its shares in Wrightsons Limited and National Foods Limited should be included in the calculation of the wholesale milk price as defined in the Dairy Industry Restructuring (Raw Milk) Regulations 2001 (the Regulations).

Under the Regulations, Fonterra is currently required to supply Open Country with raw milk at the default milk price. Regulation 8(5) provides that the default milk price is the wholesale milk price for the season plus the 'reasonable cost of transporting the raw milk to the independent processor'. Fonterra's retention is one component of the wholesale milk price formula.

Fonterra states that it is entitled to include in retention, for the purposes of the default milk price, all after tax profits, including capital profits, not paid to shareholding farmers. Open Country disagrees, and argues that this is not the intent of the Regulations and distorts the purpose of the default milk price regime.

It is the Commission's preliminary view that the purpose of the Regulations is to ensure that independent processors pay the same price as Fonterra for raw milk. The wholesale milk price formula is intended to achieve this outcome by unbundling the value of milk included in the payout to Fonterra's shareholders. This price should not include any capital profits. However, the Commission considers that in this case the purpose of the regulations cannot be reconciled with the statutory language. It is, therefore, the Commission's preliminary view, in accordance with the statutory language, that capital profits from the divestiture of shareholding interests are entitled to be included in Fonterra's retention.

The Commission's draft determination is available on www.comcom.govt.nz . The parties have been asked to respond to the Commission by 5 December 2005.

Background

Section 126 of the Dairy Industry Restructuring Act 2001 requires specific matters to be in the Commission's Determination.
(1) A determination by the Commission must -
(a) state the Commission's decision on the matters in dispute; and
(b) state clearly whether a breach of {Subpart 5 of Part 2} or any regulations has occurred; and
(c) include the reasons for the determination; and
(d) include the terms and conditions on which the determination is made; and
(e) specify the actions that a party to the determination must do or refrain from doing, which may include (without limitation) payment of compensation by one party to the other.
(2) The Commission may specify an expiry date for the determination.

ENDS

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 


Retail: New Law Paves Way For Greater Supermarket Competition

Legislation that bans major supermarkets from blocking their competitors’ access to land to set up new stores paves the way for greater competition in the sector, Minister of Commerce and Consumer Affairs Dr David Clark said... More>>



International Business Forum: NZ EU FTA Coming Down To The Wire – Hold The Line

As negotiations accelerate to conclude an ambitious free trade agreement between New Zealand and the European Union, the NZ International Business Forum (NZIBF), representing a cross section of major exporters... More>>


MBIE: NZ space sector set to star in Moon mission
The New Zealand space sector is set to star in NASA’s CAPSTONE moon mission – with Rocket Lab launching a satellite to the Moon from New Zealand in June, and the lift-off of a separate NASA-NZ lunar research project... More>>



MYOB: New Data Shows Increase In SMEs Experiencing Stress And Anxiety

The lingering impacts of the COVID-19 pandemic have led to a surge in the number of local SME owners and operators experiencing stress and anxiety, according to new research from business management platform, MYOB... More>>



Carbonz: Cashing In On Carbon: The New Marketplace Helping Native Forest To Thrive

The country’s first voluntary carbon credit marketplace, Carbonz, is here to restore native biodiversity and help Aotearoa reach its carbon zero goals by selling the first carbon credits exclusively from native forest... More>>
Entrust District: Dividend Will Be Welcomed After Another Tough Year
We’ve all heard of the saying; “if it sounds too good to be true, it probably is” but for Aucklanders within the Entrust District, getting their share of Entrust’s 2022 annual dividend payment really is as good as it sounds... More>>